Made In Kentucky


>>NARRATOR: Through the years, Kentucky has
been known for many proud traditions. Besides Bluegrass music, bourbon, coal and college
basketball, it’s also known as the horse capital of the world. But today, the Commonwealth
is making a new name for itself with another kind of horsepower. You might be surprised to learn that Kentucky
produced well over 1 million vehicles in 2013, and that’s a jump of 22% from 2012. This
industry alone has brought in over 17,000 jobs since 2010, along with over $4 billion
in capital investment. Altogether, the automotive industry employs nearly 82,000 people in the
Commonwealth of Kentucky.>>GREG HIGDON: When the ES350 Lexus comes
on board in Georgetown next year, we will move past Ohio into second place. Only Michigan
will be producing more trucks and cars than the Commonwealth of Kentucky, and from this
old country boy’s standpoint, I like to say at every junction, “Who’d a thunk
it?”>>NARRATOR: So why did the automotive industry
come to Kentucky? Good question and the answer starts with energy.>>DAVE ADKISSON: Over 100 manufacturing plants
followed Toyota to Kentucky, so that was really a transformational event when Toyota chose
Kentucky for its first American plant. All of that relates to the inexpensive electricity
we have.>>NARRATOR: It’s no secret. Kentucky’s
electricity rates have been among the nation’s lowest for years, a factor that has helped
attract valuable industry to the Commonwealth. Altogether, there are over 230,000 manufacturing
jobs in Kentucky.>>TONY CAMPBELL: Kentucky is a heavy manufacturing
state, and that’s where a lot of our good paying jobs came from, and we got there because
we had an abundance of low cost coal and an abundance of low cost coal generation.>>JIM GARDNER: Kentucky just doesn’t think
of itself as being a manufacturing state. My understanding is it’s several hundred
thousand direct employees in manufacturing.>>NARRATOR: The bottom line is cheaper electricity
rates attract jobs. And a big, longtime factor in the cost-effectiveness of Kentucky’s
energy rates has been the historic abundance of cheap coal.>>TOM FITZGERALD: Those businesses are here
not because they like the climate but because the presence of a significant edge in terms
of energy cost because of our historic reliance on coal.>>NARRATOR: Significant changes are taking
place in the world of energy. And of course, any changes that increase electricity rates,
have the potential to impact all parts of a state’s economy, including employment.>>TOM FITZGERALD: The presence of a significant
coal reserve has caused the state to become very reliant on coal as the primary fuel for
electrical generation. That in turn has attracted a number of very energy intensive industries
to the state.>>REBECCA TAYLOR: When you look at the manufacturing
sector, it is probably the biggest user of energy. If the cost of electricity is lower,
it allows manufacturers to make their products more competitively internationally and be
able to provide products to the consumers at a lower price.>>PAUL THOMPSON: Many of their products compete
on a worldwide basis. So this all comes together: energy cost, economics, they come together,
and it’s worked for this state. It’s worked very well for this state.>>JUSTIN MAXSON: It’s been a selling point
that the Cabinet for Economic Development and local economic developers have really
used to recruit industries, particularly electrically intensive industries like auto manufacturing
or aluminum smelting. So it’s played an important role, but electricity prices in
Kentucky are rising and it clearly is a challenge to some of those manufacturers who rely on
cheap electricity.>>BILL BISSETT: I think manufacturing is
critical to Kentucky’s economy in so many different ways. First, we’re number one
in aluminum production. We’re number three in automobile part production, and it’s
important to realize that it’s not just those jobs of where we make things. It’s
also all the ancillary jobs that go along with them, much like the coal industry.>>NARRATOR: In 2012, the Kentucky Energy
Cabinet predicted that a 25% increase in the real price of electricity could result in
the loss or failed creation of 30,000 full-time jobs.>>GREG HIGDON: If you’ll look at some of
our larger companies in Kentucky, they have operations in other states, and a lot of people
don’t think that some of them could get up, pick up, and leave, but they absolutely
can. If the cost of doing business changes drastically, they could move in a matter of
months in some cases and less than a year and a half or two years in other types of
cases and never miss a beat of production.>>REBECCA TAYLOR: Manufacturers really drive
innovation. If you look at all of the private sector R&D, two-thirds is conducted by the
manufacturing sector, which leads to the new greatest cars, the new greatest gadgets. So
they’re innovators, they’re job creators, and they’re really contributing to the bottom
line of the economy.>>NARRATOR: Bottom line, manufacturing is
central to innovation at many different levels and is definitely a job-creating driver in
Kentucky’s economy. But make no mistake, manufacturing is critically
connected to cost-effective energy.>>NATHANIEL ADAMS: My name is Nathaniel Adams.
I’m General Counsel at North American Stainless. North American Stainless is the largest dedicated,
vertically integrated, stainless steel manufacturer in the United States. We produce all grades of stainless steels.
Stainless steel is a commodity that is in high demand all around the world because of
it’s durability. We make the kinds of things that you find
in appliances and commercial kitchens. Also a very great deal of automotive products. We have everything right here on site. On any given day at North American Stainless,
there will be about 1,300 employees and anywhere from 500-700 contractors. We have people who are in administration.
Our commercial arm is all located right here. We also have everyone who actually handles
the steel here on site as well . Our parent company is a Madrid, Spain-based
company who came to the United States seeing the opportunities in the stainless steel market
here about twenty years ago. And I think it’s fair to say that one of the primary factors
that lead them to come to Kentucky was the stable and relatively low electric rates. Electrical energy is absolutely the most important
aspect of making the stainless steel. We use it to melt the steel, we use it to roll and
form the steel, and without it, it’s almost impossible to actually competitively make
stainless. The process of melting a solid metal into
a liquid form requires a very great deal of energy. If you walk through our melt shop and you
look into the melted steel, especially when it’s in the vessels. Stainless steel melts
at a much higher temperature than normal steel. We’re talking about 2,500 degrees Fahrenheit
more or less. The more efficient way to do it, in a modern
sense, is to heat it up using electric arc furnaces. Those are using graphite rods that
are actually heated through the electrical process and lowered into the solid steel.
It’s then melted into the liquid form, which is then molded into slabs and then formed
into the final products that you see. In any of the hot mills, it’s necessary
to maintain that heat at a very constant temperature while it’s being formed. This is one of
North American Stainless’s great competitive advantages. We manage that process very carefully
and we’re known in the industry as having very high quality stainless steel as a result. We use a lot of electrical energy and so a
very small change in the incremental cost of that energy will have a profound impact,
not only on our profitability, but on the way that we’re able to use the electric
resource. Given that we use so much of it, even a small incremental change makes our
products less competitive in the global economy where we compete. I think the average consumer could give a
lot more thought every time they pick up a product that they use to the question of how
it’s made, what kind of people made it, where they live, and what kind of values the
product that they’re using actually supports. In Kentucky, you would be amazed at the very
large number of products that you use every day that you never associate with our Commonwealth.
And it’s not just bourbon and race horses that we export. There’s a very great deal of primary material
that comes from Kentucky that goes into products that you use every day. Manufacturing has become part of Kentucky’s
best exporting base.>>NARRATOR: When coal was discovered over
200 years ago in Kentucky, not only were people unaware of just how much of the black rock
was under the Commonwealth, no one had any idea how much it would influence the entire
nation’s growth.>>DAVE ADKISSON: We have coal underground
both in East Kentucky and in West Kentucky. Two different kinds of coal of course, but
a tremendous natural resource that has not only served this state very well for decades
but also has helped fuel the growth of America.>>JUSTIN MAXSON: Coal from particularly Appalachian
Kentucky really helped grow the cities, fueled the steel industry, the auto industry in this
country and has been responsible for the growth of the country as we see it today.>>BILL BISSETT: I also think that there’s
a cultural connection and a connection through history that we undervalue. That my father
was a coal miner, my grandfather was a coal miner, and because of their hard work, I can
now do what I do for a living and they want to see that continue.>>JUSTIN MAXSON: For a long time Kentucky
was one of the largest coal producers in the country. Much of Kentucky’s economic history
and cultural history particularly in Appalachian Kentucky but also in the coal fields of the
western part of the state has really been defined by the economic importance of coal.>>NARRATOR: With its vast resources of coal,
there is a tendency to think that Kentucky’s coal production has been nothing but a steady
chart of growth for years. In fact, it’s been more like a roller coaster since the
early part of the 20th Century.>>BILL BISSETT: Coal is a changing industry
and not just in Kentucky and in this country but also in the world. We’re seeing changes
in demand. We’re seeing changes in the amount produced and where it’s produced.>>TOM FITZGERALD: Western Kentucky coal production
is up and is displacing the Eastern coal in the steam market because everyone who will
continue to burn coal after 2016 is going to be scrubbed. So the high sulfur coal from
most of the underground mining in Western Kentucky, the production I think has been
increasing.>>NARRATOR: This rise and fall of coal production
has naturally had an impact on Kentucky coal jobs. Although the perception is that the
coal industry continues to provide large-scale employment opportunities here, the statistical
reality of the early 21st Century provides a much more accurate picture. Coal employment
is dropping. While Western Kentucky coal has been fairly
stable in recent years, the drop in Eastern Kentucky coal jobs has been nothing short
of dramatic.>>BILL BISSETT: Well in our Western Kentucky
Coal field, we’ve seen an uptick. We’ve seen an increase in employment and an increase
in production, and I think that trend will continue because it’s part of what’s called
the Illinois Coal Basin. In the east we’ve seen a precipitous drop.
Essentially since January 1, 2012, we’ve lost more than 7,00 direct mining jobs.>>TONY CAMPBELL: The demand for Eastern Kentucky
coal is going down probably exponentially, actually, unfortunately and they are suffering.
The people in our service territory are really suffering right now from that loss of jobs.>>DAVE ADKISSON: I think the key things that
have lead to the decline, the dramatic decline of employment in Eastern Kentucky coal: One
is technology. It takes fewer people to mine the coal. Secondly, harsh regulations coming
out, primarily from Washington. The changing energy environment, especially
with natural gas. The previous extraction of coal, we’ve mined a lot of those seams
and the mine, the coal is simply gone. And then also pollution control equipment on utilities. So I think there are at least five things
working against the employment of coal miners in Eastern Kentucky.>>NARRATOR: While it is difficult to identify
one primary cause for this rapid decline in Eastern Kentucky coal production and employment,
it’s clear that a variety of regulatory, economic and industry changes are contributing
to the rising price of Eastern Kentucky coal.>>JUSTIN MAXSON: It isn’t as complex a
story as is often described. It’s actually relatively simple. We’ve mined out the cheapest
and easiest to get coal. And the coal that is left is more expensive because it’s harder
to get at.>>TOM FITZGERALD: The unit cost of production
of Appalachian coal has risen sharply as the reserves that are easily obtainable have been
depleted.>>JUSTIN MAXSON: That really is the primary
reason that coal is more expensive, why coal production has gone down of late and why there
have been lots of layoffs.>>TOM FITZGERALD: Even absent any regulatory
driver, if you look at the Energy Information Administration’s numbers, they had been
predicting a precipitous decline in coal production from the Appalachian region and that has come
to pass. And it is not likely to reverse anytime in the near future.>>BILL BISSETT: There are challenges in Eastern
Kentucky that we face such as topography and you look at some of the Western Kentucky coal
mines, they literally will conveyer out the coal from the prep plant directly into a barge.
In Eastern Kentucky, we often have to go from a truck or a train to a barge at that point
and then get it to the end user, so it is a greater challenge and you know it has been
mined more extensively in Eastern Kentucky, but we’re mining coal right now that we
couldn’t have twenty years ago. We have better technology now and better ways of extracting
coal that we didn’t have access to in the past.>>NARRATOR: Another factor contributing to
the decline in Eastern Kentucky coal is the continuing impact of environmental regulations
from the 1990s.>>TONY CAMPBELL: When you look at the electric
utility industry, we’re regulated more than any other industry in the country. When we
look at the EPA, in particular the federal EPA, we are regulated with air, water, and
waste. When we first really started the process it was for particulate matter and it was for
nitrous oxide and sulfur dioxide.>>TOM FITZGERALD: The first phase of the
sulfur dioxide controls that were put in place under the 1990 Clean Air Act provided a two-phase
process of reining in the emission of sulfur. The first phase had a certain target in terms
of the pounds per million BTU, and that goal could be met substantially by fuel switching
rather than installing controls.>>BRENDA BRICKHOUSE: When we think about
compliance with the Clean Air Act, in particular with say sulfur dioxide or sulfur emissions,
you can burn higher sulfur coal or lower sulfur coal and you can, depending on your boiler
and the type of fuel blends, you can look at your stack limits and meet it that way.
Or if you can’t, then you would put scrubbers, controls on the back end to be able to scrub
the SO2 out of the flue gas, and with that you might be able to burn a wider variety
of coals, higher or low sulfur depending on the capacity of your control equipment.>>TOM FITZGERALD: Now with the second phase
coming into play, everyone who is still burning coal is going to scrub. And once you install
the scrubbers, you can take in much dirtier fuel, which typically is going to be less
costly fuel.>>PAUL THOMPSON: Eastern Kentucky coal, generally
speaking, is a lower sulfur, better quality coal, but a harder to mine coal. Because we
put this equipment on, we are actually able to now purchase coal that has higher sulfur,
but it’s easier to mine, less costly to mine.>>TOM FITZGERALD: So you’ve seen a reverse
of what happened under the first phase. Now the Eastern Kentucky coal reserves are no
longer as desirable for power plant use because you can buy the cheaper Western US coal or
Western Kentucky coal and burn it because you’re going to be scrubbing the emissions.>>NARRATOR: Although regulations are often
viewed with political skepticism, the fact remains that these early environmental regulations
have had some reasonable success. Sulfur dioxide and nitrogen oxides have long
been known to cause public health issues such as respiratory problems and acid rain. Since
1995, the emissions of both from Kentucky power plants have decreased dramatically. However, new environmental regulations concerning
climate change have given rise to intense debate, especially regarding their impact
on energy rates and the coal industry.>>JIM GARDNER: Right now, new coal generators
are being built in the United States. Because of the uncertainty of future of environmental
regulations, because of the concern about specifically carbon controls, none are being
built.>>BRENDA BRICKHOUSE: On the federal side
we’ve seen the Clean Power Plan, so that’s people that sometimes call that 111D or 111B
and so the Clean Air Act, it’s actually section 111 of the Clean Air Act. CO2 has
been declared a pollutant and the EPA is looking system wide. So 111B looks at new units, if
you’re building a new coal plant or a new natural gas unit, what would those limits
be on the stack. And then under 111D, they are looking at existing
coal plants, gas plants, also looking at how renewables and nuclear and energy efficiency
fit into the mix to be able to lower overall our carbon emissions.>>BILL BISSETT: Every form of electricity
production has some type of environmental and economic impact to it, and I think it
has to be looked in with context, but to take actions unilaterally I think, puts us at a
tremendous disadvantage with a fuel source that we have in the ground here that the rest
of the world wants. I think the President is looking in a very
shortsighted view here. Leadership is one thing, an example is one thing, but it’s
going to fall very unevenly on the states and I think that’s very unfair to states
like Kentucky and West Virginia who are going to be impacted far greater than the rest of
the 50.>>TOM FITZGERALD: The EPA rules on the existing
power plants is not designed to close down those plants. The flexibility that the EPA
provided, they are allowing a number of different strategies to be employed rather than saying
you have to install controls on CO2. What you’ve seen, this is the latest of
a series of regulations that have caused an internalization of the cost of using coal
as a fuel to generate electricity. Historically, the costs were paid downwind
and downstream. And now that they’re required to start accounting for those costs, the cost
of electricity is going up.>>DAVE ADKISSON: We need to be very careful
about environmental regulations and how you disrupt the reliable energy that we’ve enjoyed
in this state. And that’s why a lot of us are very concerned about the regulatory environment,
because if the pendulum swings too far, too fast it can put Kentucky at a significant
disadvantage.>>JUSTIN MAXSON: I think the rules are very
flexible and provide many opportunities for Kentucky to meet our compliance standard without
significantly driving up the price of electricity. As clear scientific consensus says that coal-fired
power contributes to climate change and the economic cost of climate change is becoming
clearer, I think there will be more rules that recognize that our power has been artificially
cheap and that will have to change.>>NARRATOR: The bottom line here is, a variety
of key factors is making the cost of using coal more expensive. Utilities, both in Kentucky
and surrounding states, are being forced to evaluate other fuel options. Declining coal use has multiple causes, but
beyond environmental and economic issues, one distinct, unforeseen cause has been the
technological advancements that have made natural gas a more cost-effective and cleaner
energy source than coal. Utility companies are taking note.>>DAVE ADKISSON: New technology in energy
has completely changed the landscape of energy in the United States.>>TOM FITZGERALD: The primary driver has
been the expansion of horizontal drilling and hydraulic fracturing, which is the introduction
of water under significant pressure into a tight formation in order to extract natural
gas or oil.>>PAUL THOMPSON: Fracking has been done in
the oil and gas business for 60 years, but they are able to combine the two to make a
very effective cost of production and the volumes are very substantial.>>ANDREW MCNEILL: When you look at it from
a national standpoint, it’s been transformational. We have been able to develop these deep unconventional
resources that were off limits more than ten years ago.>>BILL BISSETT: Fifteen years ago we were
looking at ways to import natural gas because we didn’t have enough. Now, we have plenty
of natural gas, and we’re trying to get it to other countries as fast as possible.>>REBECCA TAYLOR: The rise of fracking in
the United States has really dramatically increased the availability of the pool of
natural gas which drives prices down. And so if you’re looking just as an energy raw
input, and you can get natural gas cheaper, you know you’re going to go for the natural
gas.>>TOM FITZGERALD: It is becoming the fuel
of choice because of a combination of significant changes in availability in the market price
and the relative ease of construction and licensing and permitting natural gas-fired
capacity. So, you are going to see a significant shift, you’re already seeing it.>>NARRATOR: Currently over 92% of Kentucky’s
electricity is generated by coal-fired power plants, but current projections show that
there will likely be a steady move toward natural gas-fired plants by 2050. While this transition is due in large part
to low natural gas prices, proposed environmental regulations also play a significant role.>>ANDREW MCNEILL: Not withstanding whether
or not you agree with the current policies of the current administration, the future
looks like that there are going to be significant requirements upon the utility industry to
reduce greenhouse gas and carbon emissions.>>REBECCA TAYLOR: When you look at increasing
regulation, that means extra cost. Whether it is a technology that needs to be put in
place to meet the requirements, whether it’s monitoring and data collection and data reporting,
those are all costs that come with regulations.>>TONY CAMPBELL: With the given the proposed
regulations on new source performance standard, which is all new plants, it has to be gas
to meet those regulations. With CO2, the technology is not out there, it’s just not out there
and available and cost effective to put on coal plants so we’re not going to be building
any more coal.>>PAUL THOMPSON: We are kind of singularly
able to go down a natural gas-fired path as the future for the time being with what’s
being set up today as policies and cost issues today. It is not a coal direction. I think
coal will become less and less used.>>TOM FITZGERALD: The utility is obligated
to use what is the least-cost technology when they’re talking about new power plants.>>BRENDA BRICKHOUSE: Building a brand new
coal plant today is a pretty big lift. The decisions that go into it would be both about
the construction and the operations and maintenance of the plant long term. It would be a boiler
and turbine, a typical coal-fired power plant, really with a chemical plant on the back end
of it. We compare that to the cost of a new natural gas unit, they are fairly straight-forward.
You really don’t have all that ancillary stuff on the back end of the plant.>>TOM FITZGERALD: You don’t have the ash
to manage. You don’t the same sulfur content.>>JIM GARDNER: When we look at the environmental
regulations, it has 50% of the amount of carbon that coal does, so one hears that because
of that, natural gas is a bridge fuel to the future.>>ANDREW MCNEILL: Utilities could invest
in base load generation based upon a natural gas portfolio that is going to be low cost
with less carbon, and therefore has a certain viability perhaps over the next twenty to
thirty years that potentially coal may have trouble dealing with in this current regulatory
environment.>>NARRATOR: Despite being a cleaner fuel,
natural gas has several detractions, including volatile prices, delivery issues and the inability
to store it.>>TONY CAMPBELL: As CEO of East Kentucky
Power Cooperative or an electric utility in general, I believe one of two things are going
to happen. We are going to have reliability issues or price issues in this country or
both from natural gas.>>PAUL THOMPSON: With coal fired, you have
depending upon your desires, 30 days of fuel siting there in case you have a frozen river
or a rail transportation problem. Natural gas, completely the opposite. There is no
storage of the volume necessary on site, so you have to rely on the pipeline capability.>>TONY CAMPBELL: One of the biggest risks,
we saw it in the Polar Vortex in January and February of 2014, and that’s availability.
Some people couldn’t get it, some people couldn’t afford it, it got so expensive
they couldn’t take delivery. We were fortunate in Kentucky we have some major pipelines and
we were always able to get natural gas for our gas units. It was a little bit pricey
but still was reasonable and we were able to get it.>>BILL BISSETT: If we have that kind of event
again, I think it will draw more attention to the reliability question and to me that’s
an immediate need that we are not discussing. We are so sure that these light switches and
electrical sockets are always going to provide this life giving resource. I think we expect
it, but any time we tamper with a fuel source, we are tampering with reliability as well.>>ANDREW MCNEILL: Reliability with natural
gas is based upon supply, but it’s also based upon having sufficient infrastructure
in place to deliver, because it’s almost a on-time delivery fuel source.>>MARILYN BROWN: I think that the problems
with natural gas availability last winter during Snowmageddon, is probably a fleeting
issue, because we’re going to build up our natural gas infrastructure to the extent that
gas will eventually be more reliable, but for the moment we do face an investment requirement
to strengthen that pipeline infrastructure.>>BILL BISSETT: Right now in building pipelines
is a questionable move for Kentucky, as you’ve seen the reaction to the Bluegrass Pipeline.
And going to natural gas will require more pipelines in Kentucky, so I think we’ve
got to look at the cost of that.>>ANDREW MCNEILL: I think that that’s an
issue that requires more discussion and a deeper understanding for how they fit within
our energy portfolio here in the state, but without pipelines going forward, the delivery
of the fuel source and therefore the electricity that’s generated from it is going to be
more complicated than it needs to be.>>NARRATOR: Energy industry experts are also
not hesitant to remind us that the historic volatility of natural gas prices has been
well documented.>>DAVE ADKISSON: One thing I think we have
to keep in mind is what appears to be stable today can change very dramatically over a
3 to 5 year period. Look at what has happened with fracking and natural gas. I don’t know
of anybody who was predicting that over a decade ago, and it’s been dramatic. But
natural gas prices are relatively volatile.>>PAUL THOMPSON: For natural gas, it has
been historically much more volatile in it’s price. Coal has been fairly consistent in
its price.>>ANDREW MCNEILL: What has happened in the
last five years, is that we’re actually becoming more energy independent in particular
with natural gas here in the United States. That could have profound impact on future
pricing and could have a very taming effect on whether not we see price volatility going
forward that we have necessarily seen in our past.>>BILL BISSETT: The reliability questions,
the volatility of natural gases prices, the fact that natural gas will likely not come
from Kentucky, I think is important to remind the public when we consider other fuel sources.
So again, doing what’s best for Kentucky has to be our driving force here.>>TOM FITZGERALD: Doing full cost accounting
is essential because for years we kind of cooked the books and now literally the books
are kind of cooking us. We are starting from a pretty difficult place.>>JUSTIN MAXSON: For too long Kentucky’s
energy portfolio has had all our eggs in one basket and that basket has been coal-fired
power. Because of the economic decline of coal, because
of those regulations that help ensure clean air, land and water, and because the overwhelming
consensus that coal-fired power is a real significant contributor to climate change,
all of those things combine, in fact, require us to begin to diversify our energy portfolio.
So I think utilities see the writing on the wall.>>NARRATOR: As the energy landscape changes
nationally and globally, Kentucky needs proactive decisions concerning energy generation and
use. These decisions will have a far-reaching impact on our economy, well beyond the coal
industry.>>BRENDA BRICKHOUSE: Our mission is low cost
reliable, clean power, economic development. Some of the poorest people in America live
in Kentucky and in the Valley. In a minimum, we care about those folks, we care about serving
those folks. Now layer on manufacturing, industrial load, economic development, jobs. Keeping electric rates low, it helps the people
pay their electric bill and be able to afford the advantages that electricity provides in
their homes as well as keeping the jobs and the economic vitality and the opportunity
in this area. Without low cost power, that whole equation really breaks down.>>JUSTIN MAXSON: How do we grow new jobs,
new economic opportunity, particularly in East Kentucky, but all over the state. The
reality is that there is no one silver bullet to the loss of 7,000 jobs over three years.
There is no single thing that we can do. The answer is going to be much more about smart,
silver BB’s. A range of strategies that we have to invest in to build the sort of
economy we want.>>NARRATOR: One strategy that could lead
to a stronger Kentucky economy is diversifying our portfolio in order to avoid dependence
on a single fuel source.>>JIM GARDNER:: I would be concerned if a
utility came to us and said because of the low price of natural gas, we want to mothball
or sell all our coal fleet and we want to convert it to natural gas. But that would
not be good because you would be totally reliant on the price of natural gas which is a market
driven commodity.>>ANDREW MCNEILL: When you look at some of
the projections that we would go from 90% coal to potentially 90% natural gas, over
a 50 year period, even Kentucky’s natural gas industry isn’t or wouldn’t advocate
for that. We understand the benefits of a balanced portfolio.>>TONY CAMPBELL: I am a firm believer that
we really need all available sources of energy in our country. And I think a diverse portfolio
is extremely important. I think and I believe our company and our board of directors believes
that transitioning everything, all our eggs in one basket to natural gas or renewables,
not having diversity in your power supply portfolio as a country is terrible public
policy.>>TOM FITZGERALD: You don’t want to become
too reliant on any particular fuel. You want the most robust portfolio that you can reasonably
develop. You want to make sure you have some redundancy in supply regardless of what the
fuel is that you’re using.>>NARRATOR: The introduction of renewable
energy sources has been one of the most discussed methods for diversifying Kentucky’s energy
portfolio. While renewables in Kentucky have some unique challenges, they also have unique
opportunities.>>JIM GARDNER: Kentucky is not the best state
for renewables because of the cloud cover, because of the terrain, but Kentucky has some
potential for renewables.>>TONY CAMPBELL: East Kentucky Power Cooperative,
we have more renewables than any other utilities in the state. There are limited renewables
in the state of Kentucky. So if we are going to really exercise renewables at a much greater
amount, we are going to have to go out of state.>>PAUL THOMPSON: In hydro, there really is
the Ohio River, and that has been principally all consumed in terms of how the change in
elevation can be used for production of power. Then you have solar and wind. And in all of
the evaluations that we have done, almost all of Kentucky, the geography of Kentucky,
we see very little ability to have the more cost effective solar and wind.>>JUSTIN MAXSON: In the near term, there
is no way renewables will replace the size that coal provides to our electrical production,
but we could reduce our dependence on coal 10 or 20 or 30 percent over the next ten or
twenty years with smart investments and good state policy.>>BRENDA BRICKHOUSE: The cost of renewables
is a debate that I think a lot of folks are having. At TVA, we have a fair portfolio of
renewables now that’s both wind and solar. It’s changing the game for many utilities.
It’s an exciting place to be, to be able to see how we can become more diverse than
we have been, be able to better serve our customers needs and wants.>>MARILYN BROWN: I think that generating
a lot of interest in the state of Kentucky over building up its solar industry would
be well worth it in anticipation of needing more of it and being able to afford more of
it as we go forward.>>JUSTIN MAXSON: Twenty-nine states have
a Renewable and Efficiency Portfolio standard. So that’s over half of the states in the
country have much more experience than Kentucky does. There’s a lot we could learn.>>NARRATOR: Though renewables could prove
to be a valuable resource, it’s important to remember that diversification can also
have impacts on Kentucky’s baseload generation.>>BRENDA BRICKHOUSE: When we think about
diversifying our portfolio, we certainly, you know renewables comes to mind first and
foremost for many people. But actually it’s broader than that. When the wind’s not blowing, or the suns not
shining, you’ve got to have something else to be able to be backup for those.>>JIM GARDNER: Kentucky’s manufacturing
base requires base load. With respect to the fossil fuels and I guess even nuclear, they
can run all the time, or close to all the time.>>ANDREW MCNEILL: We believe that coal will
and should continue to play an important role in our electricity portfolio here in the state.
There’s a role for nuclear. There’s a role for renewables and there’s a role for
natural gas.>>BRENDA BRICKHOUSE: When you’ve got a
balanced fleet or a more diverse fleet, then you’ve got the opportunity to burn more coal
when gas prices are higher and gas for whatever reason may be interrupted. There’s a hedge
if you will against price, as well as a niche in terms of where in the system integration
do those kinds of plants fit in.>>MARILYN BROWN: I think that nuclear power
needs to be a part of the diversification equation as well. It is currently meeting
20% of US electricity. It’s a major player. We know how to do it.>>NARRATOR: Currently there are 99 licensed
nuclear power plants in the United States. Though there are no plants in Kentucky, 5
of the 7 states that border Kentucky produce energy from nuclear power.>>PAUL THOMPSON: We do have in the state
the legislation that prevents nuclear power from being developed in the state. So lets
assume though that that was changed. The real significant issue today is the capital cost
for a new nuclear plant. Very substantial.>>TOM FITZGERALD: It has priced itself out
of the marketplace with the history of incredible cost overruns. Before you get to the break
point of saying “Nuclear is our least-cost alternative” you will have a number of other
options available. Gas-fired power, renewables.>>BRENDA BRICKHOUSE: It is a very expensive
endeavor to undertake new, and so you know when we think about a green field nuclear
plant or a new nuclear unit, you really are talking billions of dollars. That’s a lot
of money, that’s a lot of up front costs. The good news on nuclear is that the operational
costs and the Per Megawatt Hour costs are really very very low.>>REBECCA TAYLOR: When you talk to industry,
nuclear is for sure on their radar. You talk to individuals, they say, “We don’t have
any nuclear plants anymore.” Well, yes we do and actually six more are due to come online
by 2020.>>MARILYN BROWN: With the addition of these
new units to the nuclear fleet, the public may gain some more confidence and perhaps
legislators will begin to reconsider bans on nuclear power, because it is a zero carbon
option.>>TOM FITZGERALD: I think there are less
risky ways of boiling water than splitting atoms. In order to produce very inexpensive
electricity, we are saddling future generations with the responsibility to manage waste that
will for a millennia be toxic.>>BILL BISSETT: Nuclear is very reliable.
What are we going to do with the fuel rods? Every form of energy production has some type
of environmental and economic cost to it, and I just think we have to try to have as
honest as possible dialogue about how we’re going to power this country.>>JUSTIN MAXSON: It’s our responsibility
to figure out how to diversify our portfolio so we are less at risk as a state. Our manufacturers
are less at risk. Our home owners are less at risk. And that will take leadership to
enact smart policies and investments that grow a more diverse portfolio.>>NARRATOR: In addition to focusing on energy
production, efficiently managing our current energy usage will play a vital role in any
energy strategy.>>MARILYN BROWN: You’ve probably heard
the term of energy efficiency is the fifth fuel. We have coal, natural gas, nuclear,
renewables, and we have energy efficiency. I really like to put energy efficiency at
the top, really the first fuel.>>JIM GARDNER: One of the things we at the
Commission have been assertive about are energy efficiencies. It doesn’t mean that you’re
uncomfortable, that you turn down your thermostat, it just means you’re being smarter in how
you use it.>>BILL BISSETT: Coal is a valuable resource
and like many things, I think we need to be cognizant that, even if it’s as simple as
turning the lights off, it’s a smart thing to do, I think, not only for ourselves but
also for the places where we work.>>TOM FITZGERALD: There’s a significant
amount you can do on the other side of the meter. We are, because coal has been so and
coal-fired energy has been so artificially cheap in the past, we haven’t insulated,
we haven’t built smart.>>MARILYN BROWN: Residential customers can
look to improvements in their homes, both the envelope, tightening it up, and also by
improving the equipment that’s used to heat and cool their homes. In the industrial sector, there are new smart
ways that they can help to contribute to the reliability of the grid and be rewarded by
doing it and use energy more efficiently. So that’s by using what we call Demand Response.
So clipping the peaks from their power consumption.>>GREG HIGDON: Manufacturers as a whole are
looking to do energy audits. Having teams coming in, and some are in-house teams, to
continually evaluate how the operations are running and looking at how they can conserve
the use of kilowatts in energy in their operations.>>MARILYN BROWN: Most of the large industrial
plants have professional energy managers on site that know the premises well and are taking
advantage of the best lighting technologies, the LED options, and ways to heat and cool
their buildings, but the small manufacturers probably could use some assistance into providing
building audits and assessments of their facilities by experts that are brought in to do that
would probably be very effective.>>JUSTIN MAXSON: East Kentucky Power Co-op
is a good example of one that is really working hard to try to figure out how energy efficiency
can help them not have to build that next coal-fired power plant.>>TONY CAMPBELL: When industrial customers
come to us and have a issue where their energy cost have creeped up on them, we’ll go out
and do a complete analysis of their facility, find out where they are losing energy, how
they can save it. Sometimes it’s lighting, some time i’s air processes. A whole host
of things they can do to help them be more energy efficient.>>MARILYN BROWN: For the larger industrial
plants, I’m a proponent of Combined Heat and Power or Co-Generation, so that we take
advantage of the waste heat that they are producing and put it to good use to generate
electricity.>>DAVE ADKISSON: Businesses are making dramatic
strides in conservation and energy efficiency. There is a tremendous amount of opportunity
for us to achieve some of our environmental goals through just normal conservation.>>JUSTIN MAXSON: Energy efficiency will never
replace coal, but it could contribute 10 or 20 percent of our electricity needs over the
next twenty years. That’s a huge contribution and from that contribution can come real economic
opportunity.>>CAREY SMITH: My name is Carey Smith. My
title is CBA, Chief Big Ass, here at Big Ass Solutions in Lexington, Kentucky. When we started, we called it, what we thought
at the time was a very catchy, HVLS Fan Company: High Volume Low Speed. We thought that was
very descriptive. Fortunately, our customers and potential customers didn’t think so,
so when we’d answer the phone, they’d say “Are you those guys who make those big
ass fans?” We said, “Heck yeah!” And, not being any smarter than we are, it took
us about a year, year and a half to change the name but we did and it’s worked out
quite well. Energy efficiency, I think, is primary here
at Big Ass Fans. It relates to everything we do. That is our business. I mean, we manufacture
ceiling fans and we’ve known for a long time that the use of circulating fans is a
very, very efficient, very, very inexpensive way to provide cooling. When we looked at the original fan, the big
fan. Well, ceiling fans, honestly, they’d been around almost literally, well, since
1880’s. And they really hadn’t been improved on during that period of time. And so when
we looked at it with the big fans, that was different. People weren’t accustomed to
thinking about it in those terms, but what we did was we just looked at the problem in
a slightly different angle. An awful lot of our customers, our real base
even today, is industrial. So we were attuned to making the workspace, the workplace, much
more comfortable. But at the same time, once you get into manufacturing, you recognize
that it’s very, very cost driven and so the products that you offer, that you manufacture,
have to be, they have to pay for themselves in some fashion. One of the most interesting things that we’ve
done in the last couple of years here at Big Ass Solutions is develop our Big Ass Light
and that is an LED light. There’s an awful lot of lighting out there, industrially that
is, that is very, very inefficient. In an industrial space, in a light manufacturing
space where you’re not, you don’t have a foundry or a forge, a lot of your energy
goes towards your, towards lighting the place. And so we said, “Our customers are looking
for something. They’re asking us to address this part of the market and this is what we’re
going to do. And we’re going to do it in the way we do things.” Which means we’re
going to over-engineer it. We’re going to make sure this light is going to be here for
the next 50 years. And so we built a light that not only would,
was well made, the fixture, but built it so that you could actually change the chips within
the light so that what you’re buying as a customer are replacement chips because they’re
going to get more efficient. Some of the lights that our customers are
replacing with our lights, we’re able to increase the efficiency by a factor of 2 and
so we’re able to make a huge impact right there. We have a very, very long term approach. We
don’t have to do something today that’s going to be to our detriment in 5 years or
10 years. We’re here to build a company for the Community
of Us, I mean our tribe, and our tribe is the people that work here. In order to do
that, we have to engage all of the employees in the thought and in the endeavor to keep
the firm alive and growing, to provide benefits for those people that are currently here,
but not just those people. People that are here, their kids and their kids’ kids and
so on. I personally feel it’s very, very important
as a manufacturer, as anybody that deals with, with other people that you ought to do your
absolute best. I mean, there’s no excuse to do anything other than your best. We’re driven, as engineers, and basically
as an engineering company to manufacture and provide products that are efficient. You don’t
want to waste, you don’t to use any more resource than you absolutely have to to get
the job done. I mean that’s, that’s what makes engineering, if it’s done right, close
to an art.>>NARRATOR: Dramatic shifts in energy use
and production are already happening. Undoubtedly, all viable sources of energy and conservation
strategies should be explored to maintain a healthy environment and a growing economy.
All of our current energy sources will have to be developed and utilized carefully. There
are many factors in play regarding each available energy resource.>>TOM FITZGERALD: What has occurred in the
past ten years has really dramatically changed the face of our nation in terms of electricity
generation, in terms of energy production, and we’re not done.>>DAVE ADKISSON: We are going to see movement
within the various uses of energy in Kentucky. We need to tap into all of those to try to
remain competitive and to try to have the most advantageous energy prices that we can
for companies to grow and for companies to add jobs for our kids and grandkids.>>REBECCA TAYLOR: The innovation is just
going to floor us. So these things that might seem like, oh well they’re not robust enough
and that just seems like a twinkle in somebody’s eye. I think we’re going to, in 10, 20,
50 years see things we hadn’t thought about today.>>JUSTIN MAXSON: We’re in an energy transformation
as a country and a globe and Kentucky should be a leader in what it looks like to not just
produce coal-fired electricity, but how to also produce clean power in a way that creates
jobs and opportunities for our people.>>NARRATOR: The shifts in the fuel used to
create electricity are taking place in power plants nationwide and even here in Kentucky.
The challenge for the Commonwealth is that we must make important, proactive decisions
at both government and industry levels to address this complex issue of energy.>>BRENDA BRICKHOUSE: We’re here to serve
the people. And we are here to make sure that low cost reliable, clean, economically viable,
economically vibrant, I mean we all share those values. That’s what we’re here to
be able to do.>>TOM FITZGERALD: Every energy source has
a footprint. Every energy source. It is, I think, incumbent on all of us to try to responsibly
manage our own utilization of energy and to demand that, that the, those costs associated
with it are born by those who benefit rather than being shifted onto the backs of a relative
few people.>>BILL BISSETT: We do believe that coal is
going to be produced for hundreds of years in the future for our grandchildren’s grandchildren’s
lives, there’s going to be coal production in Kentucky, but who uses that coal I think
is the really big question.>>TONY CAMPBELL: We are an energy hungry
nation. While we are going to make great strides in energy efficiency and renewables, Demand
Side Management, and we need natural gas in our portfolio, I believe when you look at
the amount of energy that we really will need if we have a robust economy and country, that
we can’t just write off coal.>>JUSTIN MAXSON: It’s critical that our
state really think about how do we lead into a clean energy economy in a way that produces
jobs and economic opportunity that matter to people in the coal fields, and to say our
only strategy is to protect the coal industry is to put our heads in the sand.>>NARRATOR: The future strength of our economy
at all levels will be based largely on affordable and reliable energy. Nowhere is this more
critical than within our important manufacturing sector. But an energy course must be charted
that protects both job growth and the environment. That won’t happen without leadership.>>DAVE ADKISSON: Clearly this is going to
continue to unfold, but we need to be informed and on top of the situation.>>TONY CAMPBELL: I think we have a responsibility
to use energy as wisely as possible. But I think we equally have an obligation as a cooperative
to do whatever we can to help our end consumer who owns us to save money or at least minimize
the impact to them.>>PAUL THOMPSON: The simple thing that I
think people should recognize is that when it comes to laws and policies that their representatives
and senators are talking about, there are tradeoffs. There are economic tradeoffs with
energy and with the environment.>>REBECCA TAYLOR: We have to have a multigenerational
view of how we’re using energy and what the impact is on our environment because we
want to leave it a good place for all of our descendants to enjoy, so we have to be smart
about how we use the energy.>>GREG HIGDON: We can’t live in a vacuum
of uncertainty. If you do that you’re going to fall behind. We’ve got to bring some
clarity and resolve to the issue. Otherwise, not only Kentucky will lose, but the nation
will lose as a whole from my perspective.>>NARRATOR: The continuing challenge for
the Commonwealth is that we must make wise decisions at all levels to address the critical
issue of energy. Because no matter how you interpret the history,
the law and the data, Kentucky needs a common sense, viable energy strategy to ensure our
continued prosperity, our environmental health, and our joint future.

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